How is the Indian infrastructure story for tourism panning out? Especially in the light of the current budget pronouncement of 50 new destinations to be built on fast-track mode.
I think broadly there are three pieces. If you look at India from an infrastructure point of view. We had something called the PIDDC scheme, which is for developing circuits and destinations. But the amount which was there was actually small, about three to five crores. That was sort of a corpus that we had. And states were also looking at similar sort of projects and they were developing them. So, in 2014 was when we launched Swadesh Darshan and PRASHAD schemes where upped the game, and we said, let’s develop circuits only of a certain size. Typically, most of the projects are about 100 crores. And Swadesh Darshan and PRASHAD schemes averages to about 60 to 70 crores. The idea was that we should not spread our resources too thin, but make a visible impact at destinations. I think in the past 10 years the states have also upped their game quite a lot. And they’ve also learned how to do projects. Because, when we launched it in 2014, states didn’t have the wherewithal to create proper DPRs and be able to envision projects. But now I think states have also developed a lot. In fact, several states are doing a lot of things without even the Government of India’s support.
Earlier your proposals used to demand a matching contribution from the states, am I right?
Was always a hundred percent contribution. That continues.
So now your projects are a hundred percent. And their projects are also a hundred percent.
Their projects are their own; our projects are given to the states to do so. I think when you revisit this after 10 years, I think the capacity to envision projects, to develop projects has grown. Demand has picked up. India is also looking at having projects of certain scale and of certain quality. Like for example, the Statue of Unity. It has been grown from the ground up, completely green field. Today, it’s a project which stands on its own.
The Statue of Unity is a state project?
Correct. So basically, what it does is it gives confidence to a lot of people that you can start a greenfield destination and develop it and make something out of it. I think one learning that we’ve also have is that in the earlier iteration, we have basically given consent on the basis of representation, as in projects, as they have come. So, the question now is how to ensure there is equitable distribution of resources amongst all the states and UTs. So now we are rebooting it, the idea is that we have changed the intra entire understanding that under Swadesh Darshan, we will have a hundred crore limit. And earlier it used to be circuit. Now under Swadesh Darshan too, we have said it has to be a single destination. We have now moved it to 250 crores. It’s the destination. Circuits are out now. So now we are only focusing on destinations and the cost can go up to 250 crores, but the catch is that it’ll not be given on the basis of geographical distribution. But all the projects will be sanctioned on the basis of challenge mode, which means that the state has to propose a project and it has to say, this is what the project is and this is what it’ll deliver. What is the impact and the value that the project will deliver in terms of how much private investment can it attract? How many jobs can it create? How many livelihoods can it support? Does it support the green agenda?
And, is there a template for evaluating on such lines?
There is a template. 25% is of the marks are given for connectivity. Where destinations with good connectivity are chosen. 25% is if you have a major attraction to boast. So, suppose if you’re a destination which has a UNESCO World Heritage site or a national park or something like that, that gets 25% more marks and the other 50% marks are basically on other aspects, including having a viable marketing plan under which the state will promote the destination. How many jobs do you create? How much private investment potential does it have? All of those things.
But these are not necessarily going to be Greenfield?
No, not necessarily. The idea is that it can be an existing destination, which can be developed, provided there is further headroom for development. Or, it can be a greenfield destination where you are trying to decongest an existing saturated destination.
And in these, who’s the implementing agency?
The state government. We give the money and they implement it. We have a project management consultant and typically it varies from 18 months to 24 months for completion of the project. So, Swadesh has been reframed like that. So similarly, PRASHAD also we have said that we can have larger projects.
Earlier, Ministry of Tourism was doing something called the PRASAD scheme, which is pilgrimage, cities, and destination development scheme. The Ministry of Urban Development was doing something called the HRIDAY Scheme, about heritage sites, which were being developed. So, what Ministry of Urban Development did was this heritage piece also, they asked Ministry of Tourism to take over, which is why we have merged the schemes. So, the earlier PRASAD has become PRASHAD, where the H stands for heritage. So, it can be for pilgrimage or for heritage.
So, Ministry of Urban Development transferred that pilot project to you?
Correct. So that got incorporated into our existing schemes. In Swadesh Darshan 1, we had 76 circuits, which were developed out of which 75 are complete. In the one left, there is some issue, but it’ll get completed. This includes built, operation, account settlement, everything is done. And being run by the state. And they’re using third party operations and management.
Name me one of these pilot funds?
There are many of them, like for example, in Thiruvanthapuram, we have the Pamban Swamigal, we’ve cleaned up that entire place. There’s a promenade with stones. We’ve removed all the ugly wires, which used to go around. We cleaned up the drains, et cetera. The tank and all that has been built with the Bathing Garden, proper steps etc. The maintenance of that is being done by the temple authorities.
In MP, there are resorts that are renovated which are running well. Where MPTDC is running it. The one in Chhattisgarh is now privately operated, but basically have opened up new destinations. So, from that point of view, I think largely the projects have been successful.
So that’s where we are with the existing schemes. Now, one other exercise that we did last year is called special assistance to states for capital investment. Which are basically proceeds from the GST collection, which are given to the states as a 50-year interest free loan. Basically, it is in the nature of a grant because, after 10 years, the value of money is basically zero. So, it’s 50 years.
How much money is this?
And this is 3294 crores of rupees worth of projects to be dispersed in one year. We have already dispersed this last year, towards about 40 projects.
So that’s almost like 80-90 crores per project?
Correct. So, we’ve said each state can propose projects up to 250 crores. With a cap of a hundred on each, because these are short gestation. They have to be completed by March 2026, and these do not come within the credit loan book of the state. So, it’s more like a grant. So, we ran it on a challenge mode and based upon the template that I have prescribed on connectivity, et cetera. And then the states came and pitched their proposals, among them the best proposals have all been cleared.
The other issue is private infrastructure. Basically, the demand is skyrocketing, but supply is just not keeping up. There is a huge mismatch between supply and demand today. Because from one estimation, we seem to have 1,80,000 hotel rooms in India today. And if we have to map the demand that we have, that is after removing all the fluff. If we map the existing demand to the supply, our supply should be something double of what we have today in branded hotel rooms. And similarly in unbranded hotel rooms also, it’s a similar story. So, there’s a wide gap which is leading to overpricing, et cetera.
Add to this, the orders placed by airlines for more aircrafts. More people will travel, they will need rooms to stay. We are therefore pushing with Ministry of Finance to open up this sector, by giving hotels this infrastructure status. Today, hotels are classified as real estate. So real estate typically means that I have to repay my loan in about eight years’ time. And my interest rate is about 10 to 11%. So, if you map it to that level of interest, and the fact that I have to repay back in eight years. We have yet not seen the kind of phenomenon that has happened in China, where a single player has built 600 hotels in five years. Our existing financial model has not attracted the kind of investments that we need. So, what we have been suggesting is that you must bring hotels under the ambit of infrastructure status, much like it is for roads and airports, et cetera. So that this eight-year repayment period goes on to 15 years and then your rate of interest also drops by 2-3%.
The second thing is that the states should take an entrepreneurial position and states should say that we will make the ease of doing business simple, how to rationalise the clearances, et cetera. Today, we need to take about 56 clearances to start a hotel on an average. And each of them takes about 60 days. It’s not all done linearly, but still. So, we need to look at which are the ones which are critical, which are the ones which are not serving the purpose. Can we remove those? Can we look at fixing timelines for them? How to get the bureaucracy to deliver on time. These are things that they need to do.
Thirdly, if the state takes an entrepreneurial position, states should also give subsidies and incentives to mobilize that investment. Today many people may want to invest, but they’re sort of still undecided. So, I think to take them past the tipping point, they need to put something into the mix.
What about land? One of the issues they have said is land is expensive.
I don’t think we will be able to do much about the land because in what way can the government subsidize, except one thing, which is essentially an argument we are having with the Ministry of Urban Affairs, saying that we need to have land zoning and planning carefully, which means that if you are going to say that there is a piece of land, and this is going to be big for the purpose of a shopping mall, office, etc, include a hotel therein as well. From an urban planning perspective, you need to have hotels in key places, for business and everything else as an enabler. The second thing is, even amongst hotels, you need to refine that process because if you don’t nuance it, it’s always going to be a five-star deluxe hotel, which will pay higher rentals to the state than lesser stars. Otherwise, people who stay in a two star or a three star hotel will need to stay 20 km outside of town.
We also want the states to come and say that wherever they have land, they must say that this is a land bank that we have. And is there something that you guys would be interested to come? And some states have done excellent work, like in MP, they put the floor price at one rupee for some of them. So basically, I’m starting from nothing, but I want hoteliers to come. Because once that flywheel starts spinning, others will come and, you know, the market will find its own sort of a balance.
So, coming to the present budget, where we are looking at 50 new destinations?
So, the idea really in these 50 destinations is twofold, is how do we make focused intervention at destinations to create things with critical mass. What the budget document says is that first states should come with land to get sanction for the project, states should say that I have this much amount of land. The land cost is not included in this.
That we will have to figure out how we want to do it. Either we do an SPV mode in which we take land as equity and then we develop the trunk infrastructure, how we want to treat the land. We will figure out when we come to the guidelines. But the essential thing is that you need to have land to make a bid. Second thing is that this private investment needs to come in strongly. All of these destinations will automatically qualify for infrastructure status. So, we think these 50 can be engines for growth for the private sector.
How do we take this into fast track? Often in the past, good intentions have not produced results, as in the envisaged 12 destinations by them tourism minister Mr. Scindia?
The idea is not to lose the tempo, and the idea is to push hard at it. Fortunately, I think from that time to now, India tourism has come a long way. The states have also come a long way. So, all of them realize the potential of what tourism can do. And especially from a national perspective as well. From the fact that many jobs will come from tourism, textiles. I think it’s a national prerogative, and I think states are also very aggressive. I think today my sense is that several things are aligning well. So, with a little bit of policy alignment and if we are able to unlock the genie of this private sector investment, India will take off.